Even the paper of record for the oil industry, Oil & Gas Journal, got it wrong. With the release of the latest BP Statistical Review of World Energy, media outlets appeared to be taking dictation rather than asking questions about which countries produced the most oil in 2014.

The most important question they could have asked is this: How is BP defining oil? It turns out that oil according to the BP definition includes something called natural gas liquids which includes lease condensate--very light hydrocarbons that come from actual oil wells and are included in the oil refinery stream--and natural gas plant liquids which come from natural gas wells and include such things as ethane, propane, butane and pentanes. Only a small portion of natural gas plant liquids are suitable substitutes for oil.

Production of natural gas plant liquids in the United States has grown rapidly as a result of increasing exploitation of natural gas in deep shale deposits, so-called shale gas. These liquids are useful, but they are not oil and only displace oil in a minor way. Moreover, their energy content is around 65 percent that of crude oil and so counting barrels of natural gas plant liquids as equivalent to oil is doubly misleading.

The second question media outlets could have asked is whether natural gas plant liquids can be sold as oil on the world market. The answer is a resounding "no." In fact, major exchanges accept neither natural gas plant liquids nor lease condensates as satisfactory delivery for crude oil. And, if we subtract lease condensate from each country's total, U.S. production will actually look relatively lower. It turns out that U.S. wells now produce a higher proportion of condensate as a result of growth in oil extraction from shale deposits (which tend to be rich in these condensates).

All of this leads my friend and colleague, Texas oilman Jeffrey Brown, to point out the following: If what you're selling cannot be sold on the world market as crude oil, then it's not crude oil. The implications are fairly obvious: The world has substantially lower oil production than widely believed, and growth in world oil supplies has slowed considerably in the last several years. Using the BP definition of oil, world production in 2014 was 88.7 mbpd. Using the stricter definition of crude oil including lease condensate, the number was 77.8 mbpd. Big difference!

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So, BP and the oil industry have one definition when referring to oil supply--one designed to create a rosy picture of the future--but must bow to the market's definition when they actually want to sell oil to somebody. Who would you accept as the better authority on what constitutes oil, the buyers or the sellers?

All this is not to deny that oil production in the United States is rising, and has been doing so rather quickly. But, this must be put in context.

It's difficult to call out the venerable BP Statistical Review of World Energy, especially when one considers that BP does this as a service to the world. The company spends money gathering and organizing data on all kinds of energy and makes that data freely available to anyone who wants it. On the other hand, we should recognize that BP has substantial U.S. investments, and this may color its view on the future of U.S. oil production. Downbeat assessments don't do anything for stock prices.